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NEW YORK — Wall Street staged a mild retreat Friday, quietly closing out a year that will be remembered for the stock market’s great comeback — a year-end rally that pushed the Dow Jones industrial average past 12,000 for the first time.

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By all accounts, 2006 ended up a very good year for stocks as bullish investors bounced back from a slumping housing market and the Federal Reserve’s two-year campaign of interest rate hikes. The markets approached record levels in the spring, pulled back sharply in the summer, but found a clear direction in the fall to send the major indexes to multi-year highs.

Blue chips were the standouts of 2006. The Dow Jones industrial average, the index of 30 of the nation’s biggest companies, hit record levels dozens of times since achieving its first close above 12,000 on Oct. 19; it traded as high as 12,529.87 before dipping to its close for the year.

This was the best year for the stock market since 2003, when Wall Street staged a massive recovery from levels sideswiped by a bear market. But 2006 will really be remembered for the market’s soaring to heights not seen since the height of the dot-com era — this time, however, Wall Street advanced cautiously, not recklessly.

The rally was fed by investors’ growing belief that the economy has withstood well the Fed’s rate hikes and the impact of record high oil prices. And some analysts expect the advance to continue.

“The stock market is correct in its judgment that we are probably only in the fifth or sixth inning of the game, and that this [economic] expansion may even go into extra innings,” said Stuart Schweitzer, global markets strategist for JPMorgan Asset & Wealth Management. “This was a barn-burner of a year, and I expect reasonably solid results over the course of 2007.”

The Dow is up 16 percent for the year — its best showing since 2003, while the Nasdaq is up 9 percent and the S&P 500 has risen almost 14 percent.

It wasn’t just the stock markets that made significant gains in 2006.

The bond market moved in lockstep with stocks — a rare event on Wall Street. Investors bought into the equities markets because of a strong economy and robust corporate confidence. Meanwhile, typically more conservative bond investors used the fixed-income market as a hedge for a possible recession and interest rate cuts.

This year was also a bit of a rule bender for Treasuries. Yields on long-term Treasury notes and bonds were lower than for short-term Treasury bills. Junk bonds were in such demand that their yields were on parity with those of investment-grade bonds.

Bonds were little changed in Friday’s session. The yield stood at 4.37 percent on the first day of trading this year, but was over 5 percent just a few months ago.

The U.S. dollar lost support in 2006 as the Federal Reserve ended a two-year campaign of rate hikes on Aug. 8, and has kept rates unchanged in its past three meetings. Rising interest rates in Europe could help the region lure foreign investment away from the United States, further pressuring the dollar next year.

The dollar was mixed against major currencies on Friday, while gold prices edged higher. Investors have sent precious metals sharply higher, viewing commodities like gold and silver as safe-haven investments instead of the dollar.

Plunging oil prices also fed the stock market’s rally. Crude reached all-time highs in the summer of 2006 when it briefly surpassed $78 a barrel due to the resilience of consumer demand and expectations of a bad hurricane season. But energy prices soon plummeted back to 2005 levels by the fall when traders saw that refiners in the Gulf of Mexico were untouched by hurricanes, and realized global crude inventories remained ample.

The price of a barrel of light sweet crude on Friday rose 52 cents to settle at $61.05 on the New York Mercantile Exchange — about 22 percent below its highs of the year.

There was little corporate news as traders looked toward a four-day break that includes a suspension of trading for New Year’s Day and
the funeral of President Gerald R. Ford
. And, again trading was thin — typical of the week between Christmas and New Year’s.